LEVI - Earnings call transcript Q3 2024

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Operator

Good day, ladies and gentlemen, and welcome to the Levi Strauss & Company Third Quarter Fiscal 2024 Earnings Conference Call for the period ending August 25, 2024. [Operator Instructions] This conference call is being recorded and may not be reproduced in whole or in part without written permission from the company. This conference call is being broadcast over the Internet, and a replay of the webcast will be accessible for 1 quarter on the company's website, levistrauss.com.

I would now like to turn the call over to Aida Orphan, Vice President of Investor Relations at Levi Strauss & Company.

Aida Orphan

us our call third joining the to for for results quarter you on today the discuss Thank fiscal XXXX.

our today's be Harmit The the conference Financial the IR on and link results in posted to me call of found release Gass, financial can site. Michelle call Joining on earnings our complete CEO; QX and today's Growth our Singh, webcast and Chief section on of our our also Officer. We've are President website, investors.levistrauss.com.

We'd risks to Risk year factors XXXX, like information ended our any our of our statements. that review we our you Factors section to update materially call we are will on this XX, by be could statements based the Please cause to remind Actual filings of differ no these as making statements with call, today, obligation this and available differ. could contemplated XX-K us November statements. note the forward-looking which on for Form Also on results the that of for the to those involve SEC, from that assume forward-looking forward-looking the particular, uncertainties. and in results

release. effects currency other measures provided intended comparable taxes GAAP unreasonable certain challenge measures quantifying but discuss financial restructuring, in this charges. we information of future measures to, most not including, to their GAAP the results. and non-GAAP Reconciliation call, press to of to non-GAAP severance our fluctuations, During forward-looking efforts various will Reconciliations are to substitute due cannot foreign GAAP corresponding in measures. are These for any however, the without non-GAAP a the non-GAAP not be of and today's our restructuring-related included measures, items, be limited

noted. on currency will on Michelle webcast referencing and Please constant this will of call website being a give call is the question X be hour, that and otherwise be website our Harmit to please to available IR have Today's replay unless limit call shortly. this the is their Finally, note addressed. for others to so revenue numbers, time one yourself opportunity a scheduled at questions

like And turn over I'd to to the Michelle. now call

Michelle Gass

today's Thank constant in call. the the and Denizen exit X% QX, everyone, revenues increased to adjusting net X% welcome, you, In currency business. for and when of

While we had brand, quarter, saw Levi's globally driven the which in in years. higher we QX, grew Levi's expectations X% versus best the for acceleration the marking growth by for X quarterly HX

that of continue to to getting and business up the are key XX%, DTC We fundamentals strategies the including to gain our U.S. traction, underlying Europe are pleased and continuing growth. returning our stronger positive be

Profitability EPS areas expectations quarter: these improve Mexico, QX are that evidenced term. to did continues gross XX%, There while deliver making and enabling record this headwinds our points adjusted basis diluted Dockers, margins position growth. us of as to by we're address adjustments long and to company for and expansion double-digit to adjusted of China the X meet margin EBIT XXX the not implementing plans strategic

potential to with the a the undertaking are category Accordingly, Levi's including Dockers business, as narrowing business the evaluation strong, we operating a DTC-first in realize First, our strategic opportunity. khaki leader a an alternatives high-quality to a our future through company, other heritage. significant to be global Dockers well-established transactions. of with American focus Yoga. continues or strategic is global sale we of It well pivot as to full Beyond accelerate transformational are as brand the

and path We their identifying the are committed to reach that both potential value. Dockers Ellis enables forward & and to right Co maximum

we of X% this significant business important overall approximately continue our see today, comprises market. of only to long-term China while Second, potential

performance overall we shoots, improve we've these done with work backdrop and further the has our are macro business is green the showing not to challenges. our While exacerbated satisfied

We are veteran interim in in a replaced and execution track record market. to action Asia of improve focused with company our leader. our as We've performance business decisive of on the strong and our appointed taking and this XX-year have reset a are China controllables the Managing Director the

We in who this have will support transition. continue a to strong team tenured China

improving external, while grew for wholesale key in including third, this And with at Latin customer the wholesale mixed, some a has and shipping. with low has impacted made that cybersecurity performance DTC, changes single have one double-digit reasons partners our recently in our our We're digits working including control, stabilize in Mexico customers Mexico channel. Performance been America growth business others and key breach closely our to aimed at quarter, within underperformed. this

the to in fashion to am joined to place Burberry, recently the the company most as underscore of of I make experience the turn Chief as brings thrilled have wealth brand. experience Officer in Commercial the With including that these a want Flore issues and I In we of details knowledge and him Commercial team. progress. to expertise, I Before Levi's the address to the Gianluca XX-plus quarter, July, swift retail market. the Officer China sector, for expertise years Gianluca welcome deep of with Chief

heat leading in its the our I context the and talk growing global with will continues boost cultural Levi's to the now the X% brand our relevance brand. quarter. strategies, with through brand with of in third quarter starting

as share in market #X while Our as growth in competitor. category, is we U.S. as in brand our reflected our which the in men's women's U.S. leadership hold position closest the our denim solidified jeans continued we maintaining the much as gains share market twice

We our consumers brand. share efforts supported high-income also the gain by elevate among to continue to

business both XX%, in bottoms tops. women's remains double-digit growing growth and robust, Levi's reflecting Our

took integrated global center icon is step we a in through significant on reaffirming recent history. anything scale Levi's another with this Earlier Reimagined, an the The at campaign week, culture place unprecedented titled fully global our Beyonce. unlike partnership in of

with Monday debuted subsequent on the run chapters The campaign that first through XXXX. will chapter of

e-commerce and essential campaign a original than be core features through to classic X,XXX campaign The and homage pays We'll channels ads points more XXX and look to and around our women on reinterpretation celebration icons globally. Levi's of and across to ways life touch the focused throughout products X direct-to-consumer fans We're global connecting world. with tees see like proud forward modern in activating come XXs, the to our truckers new icons. the

product where to improving. Moving and is our pipeline strong

DTC. with our Let's in business. grew bottoms X% XX% start core Overall, Levi's bottoms and

our As XX% the both by in a growth denim and of while into no was consistently to product our drive our bellwether of leader, men's iconic than forward with the better up newness. the in continue category health strength quarter, delivering which leaning for brand XXX the women's. core There's we

Loose this into bottoms of a and looser up larger part with at for remain baggy XXX the fit forefront XL the inject trend. of And we denim the him of continue in our through for XX% quarter, continues fit channels. strength launch loose and her, the trend We the across the reflecting and to become newness genders portfolio. to

overarching denim more. tops, to a denim lifestyle brand denim expand being includes from owning dresses, denim becoming starts denim dressing, is strategy bottoms which western jumpsuits brand denim with skirts, and Our to that a head-to-toe

and skirts, was third we consecutive denim. in the vast growth quarter, the of majority triple-digit For dresses saw which

XX% wovens up these outerwear with DTC by in performance polos All as in in DTC, our exceptionally XX%, women's truckers, for tees. up positive tops DTC ongoing DTC. up well, pleased XX% tops up sweaters. XX% nongraphic X% wovens to and and with overall driven contributed increased and performed business up in Levi's strength and the men's Women's the by and tops being were women's We're in to Levi's traction XX%. and XX% addition newness in revenue X%, fueled and quarter

as DTC continue preferences X% to versatility digits towards respond The to comfort overall in quarter his Levi's low men's we this grew business more single closet. and and in shifting

Cool, are innovations and focused recently performance consumer, offer was growth range the quadruple innovative through we're to tech in reflects our on digits in non-denim quarter. our Performance for quarter. helping fabrics the to drive men's fits bottoms In non-denim up the which XX% launched We able Levi's delivering series like

season, tops the time including including denim to the excited newness pipeline dressing, deliver men We're holiday inspired to robust enter into down cooler a season for we for we're and in winning collection doubling outerwear forward our fits fashion on of expansion, and holiday baggy weather. as a and our Looking and XXXX. like loose to denim fans strategies, women our

shifting Now to DTC first.

sales quarter in by Our XX% performance, global direct-to-consumer up tenth positive year the delivered consecutive driven of for XX% another business quarter. of strong comp the top on prior growth

gravitate were full Our growth mainline strong performance by up as was consumers price brick-and-mortar U.S. to was in which continue DTC, XX%, up AURs again led our high single digits our products. in premium driven toward business retail. U.S. by

conversion increased positive to are and stores our high-performing running strong and on These in-stocks. bar KPIs including metrics by newness improved the as response healthy our raise higher store and improved portfolio, consumers' reflect across to continue as innovation AURs. well product We encouraged the both traffic,

outperform, loyalty enhancing to more the up assortment nearly a new by consumer experience. to strength million online member total UPT and X program, premium consumer members all segments, QX, across globally. in million site in Ongoing AUR. expanded XX%, with trends acquiring elevate in initiatives base to our our engagement bringing XX encouraging global reflecting and increases continues supported traffic, are deliver E-commerce our and We're seeing

wholesale. Shifting to global

in QX, from improvement is excluding down headwind it be continued X% channel X% in a HX this Denizen, revenue While our down sequential to to seeing growth. overall to

this ensuring We XXX channel's profitable gross evident a in more over are margin And focused year. strategic healthy, increasing prior is business. than the is basis points this on focus

brand women's in the including digits up bright Levi's single Levi's down In again growth wholesale, spot, tops. quarter, X% in U.S. low a was X%. the was

up in strong positive our of order in Europe continues QX. forward by X% wholesale newness, and Europe to by the wholesale encouraged are book We growth, driven demand to for return be

and we're good our our trends overall. feel We to improving, in customers about the are including global U.S. the Sell-out Europe, business excited about continue wholesale expanded trends in and assortments. are seeing

portfolio. our strategy, largest the U.S. quarter. third one of in Growing remains our international grew and business our outside the to now Turning X% business the our powering opportunities

Importantly, X%, in growth Europe up XX% growth wholesale growth mid-single-digit and including DTC. inflected in to

Beyond QX, and share committed e-commerce. brand and will potential. this impairment profitability. Beyond Harmit we acceleration Yoga long-term to leadership, Nancy Nancy to more driven took, have and laid we on have disciplined up Yoga and the the are out reset and in in from fulfilling Despite which strength XX% confident Green's Under was her based by drive direction team growth about, more strategy the we strategic its charge remain wholesale

categories, across you have of core globe. The let today's our and it and accelerating from strategies strong, call be if channels we brand In we're right profitable the that walk business, away one we the remains are growth. confident growth long-term to closing, with the that thought, fuel Levi's

Finally, I'd around is incredible like the world to outstanding to and talented our our that day. delivering fans passionate every team thank service

Harmit that, turn performance with financial it color And now will our to to on more provide over and I outlook.

Harmit Singh

XXX basis Michelle. expansion maintaining delivered This significant while tax inventory months adjusted flows. improvement growth by generating you, I dollars want a diluted profitability and have double-digit In leveraging despite XX% drove X X, EPS and higher XXXX. through the discipline quarter Thank we adjusted from adjusted improved expense our cash points. first I EBIT flow emphasizing and much the headwind and of $X.XX start confidence to in increasing cash margin with EBIT margins

globally, acceleration in our exceed of While the the driving profitability top encouraged profitability end strength factors Other to low the profitability, the our increase contributing of are driven ability on line to targets. our in in margin. key our Americas' gross guidance, by include improvement the by brand came Levi's we

in basis return we this improvement the Our basis DTC quarter. On of continued business to margins XXX than in growth. points highest-margin year-to-date market of margin our by more expansion basis, channel, last Europe, a the XXX direct-to-consumer points versus operating our And where profitability year. this improved generated

flow-through clean faster profit of our with every Xx than in combined keeping continued incremental SG&A allowed in us resulting dollars revenue. dollar gross on focus quarter of adjusted grow X, maintaining discipline levels, inventories and This, higher dollars approximately to and promotional

portfolio and in this long brands runway to alternatives business us quarter expect will focused, a profitable X. growth. as Also, higher-margin a help Dockers. faster-growing, for further become today, We decision improve are more with discipline a reviewing highlights to of This announced we allocation that have continue our trend strategic of we capital

percentage that as forward year. this and revenue are X X adjusted identify & external margin as enable sequential EBIT to have the we of continuation 'XX, profitability reach experienced fourth with Dockers quarter, path We And growth accelerated points we quarter their working we will Ellis X expanded to the right advisers revenues independent In potential into businesses. we maximum HX the look and believe and points. expect Co percentage and value versus

top be as line as by DTC, progression As momentum I we and the brand the will wholesale, savings. QX, well Levi's share project acceleration strong cover Profit will be growth outlook. more driven revenue Europe. the of will and head into fueled of I growth by when fuel progression

to net Beyond X And percentage points were with Quarter Levi's from turn Denizen. percentage of growth, by X partially billion, The approximately will revenue contributing Yoga, up results. of our decline drivers points were the Dockers. approximately of Signature I that, offset $X.X growth X%, X revenues and and excluding

the in to was quarter a of net quarter for X. quarter, the margin. While and Signature $XXX revenues XX% profit was declined are X gross or million growth largely return expect issue timing third Gross it we to it quarter record in

margin points continued basis gross year, freight new and to the meet points full distribution adjusted XXX percentage driven basis we Adjusted XXX of by a was SG&A higher increase million expenses process FX in increased price points versus basis an and offset as short-term expenses X% costs, increased to as last year. higher $XXX to the headwinds related factors as distribution demand. adjusted last a net expenses DTC shift into and was well to product chase to from to higher increase in advertising relative SG&A in parallel products million. lower U.S. of DTC the SG&A Our primarily approximately XX quarter air up sales. primarily And dollars These as related center revenues, running of year last The in $XX.X the

dollars approximately significantly, We SG&A well. party process to margin at third-party GXO U.S. EBIT the last grew third the twice have is EBIT the change year. contracted versus profit logistic points with providers progressing from as increasing XX.X%. grew adjusted to in also EBIT and pace transfer with Europe of to dollars and adjusted and the Maersk XX% X% and owned Gross leverage by of XXX increased basis dollars Adjusted leading in up

part our continue to in our offset incremental of our as efforts million played efficiency role savings expansion Fuel savings resulting and helped to Our continued outcome, Project throughout investments quarter key this Approximately P&L. $XX in growth. in DTC in fuel a A&P this to

Adjusted $XXX are to rate. savings XX% million in of up positioned EPS target well even with was more We despite deliver line our prior to 'XX to tax a sight diluted opportunity beyond year higher $X.XX, that.

brand's XX% Our adjusted the to of Yoga and with our impairment continues X plan was conjunction XX% charge well, up to the goodwill $XXX in for and diluted noncash impairment EPS assets excludes The and business due testing. in related The investing million strategic the year-to-date. in intangible the new quarter Beyond expansion. perform to annual growth

we year. of our The down were year X%. the prior inventory expect composition lower is with end inventory inventory than dollars to Reported healthy, and

have and in to includes in the and $XX we dividend to we shareholders declared we quarter versus per year. X. And returned XX% more with to line dividend X in QX, capital of share million $XX repurchases. restarted Since dividends million shareholders, quarter, share repurchases. in we quarter In repurchases share, a which $XX million Turning 'XX, returned $X.XX prior share for have

up adjusting brick-and-mortar Denizen product points up of year. review margin the highlights Gross basis XXX also due the let's to X%, Americas and to by growth XX%, prices Direct-to-consumer full key revenues prior costs outperformed were Higher exit by operating strong favorable driven of and mix. e-commerce. double-digit margin XX%, The segment. contributed to were the business. the up Now for in

as an most quarter, returned Europe prior channels channels. up to growth X%. the across points DTC quarter, increasing with from are XX%, in quarter X%, XXX notably X, European in margin growth saw to with growth both up growth in XX.X%, In of return digits Wholesale growth was operating business reflecting gross year. up XX%. women's acceleration margin consumer. in expansion quarter, strong to fits up e-commerce, this We this The basis an double and newness both the fashion resonating resulted up

revenues X% prior e-commerce and Direct-to-consumer revenues in X-year increased stack. compared up increased stores on were company-operated revenues, X%. by the driven year a up to Asia and both net strength wholesale XX% addition to X%, were which in

China we businesses. While in many and strength Turkey saw Middle significant persisted in Japan, our headwinds including East markets, and

flat which to of margin XX%, operating year. delivered was last Asia

let's Now our to turn outlook.

Levi's into the a campaign, wholesale are the DTC We improvement the XXrd driven by continued Europe, growth momentum global in new supported in the be confident and from by This and acceleration will QX that week. in of with benefit brand continue sales will in accelerated marketing QX. along

headwinds However, Mexico offset China, by year Dockers expectations our full being wholesale. are and prior in

these to mid-single-digit the As quarter. end guided fourth range of constant our expecting for the year, And X.X% we X% to X% and the X%. guidance X% low revenue a our of reported to revenues of result the headwinds, from currency from adjusting to we previously end are are growth high for

I'm improvements will step fully recognize as from confident beginning see these to we time to And that in we benefits into our materialize, while plans we these areas. to QX. actions are take address the

referenced earlier, also our As in we're expansion. I expectation confident progressive of margin

in quarter basis full our year gross DDC contribution XXX margin increasing a and beat are points basis quarter from driven points higher We X. expectation by the to X XXX from

savings, as Fuel down be a attributable The and the by X% SG&A be XXrd year progressed. million. expenses. to will as in is year has to come to compared prior mitigated are be QX percent expected to Full Overall, in around the which partially SG&A revenue week of Project year $XX increase advertising acceleration up has higher SG&A expected with the

gross profit than We EBIT be dollars flow-through low dollar quarter the X in driving be to QX expect in higher SG&A margin to teens.

year continue leveraging XX%, above to expect EBIT year. approximately slightly XXX be We versus last to full margin to basis points XXX

now X. the million We around for full expect $XX expense year year with to million quarter $XX be anticipated for interest

$X.XX rate is in EPS projected at to of adjusted the tax QX We full the in range. Our year mid-teens. to to be $X.XX midpoint be expect now guidance

for remain net system to doors also year. new XXX on We track open the

from are here summary, my key the takeaways discussion In today.

will which by brand and we innovation. of fueled seeing in momentum new the are First, product positive Beyonce meaningful QX globally, Levi's campaign accelerate a

our which will footwear and This we Second, exit business drive Levi's and actions the Beyond narrowing growth taken year. Denizen our this earlier along we and have higher the alternatives to brand evaluate Yoga, focus decision for Dockers margins. to with our includes are strategic to

the Third, the the term. our profitability our higher furthers operating well focus on positions than the and driving term. to believe geographies, margins strength position across And and XX% through in fourth, of both the Europe. channels longer across for as a beginning U.S. achieve sequential revenue progression and the at we evidenced year profitability improving we're less and economics stronger us key profit over business long the us SG&A structural and the exiting path much gross in on by

and for let's And ahead Q&A. open line with go that, the up

Operator

the Guggenheim. question Bob Instructions] [Operator of first comes Your Drbul. line from

Robert Drbul

sneak them forgive Aida, questions I Two for if could in. please me. you,

Dockers would on the I QX you on that can miss is one rationale then just answer bit a for the the spend guess, of Harmit. and in first just confidence evaluation this those, just can you more and drivers great. The you the expand timing acceleration? a be quarter's And revenue just the bit of Michelle, more Can for talk -- just your if it, around

Harmit Singh

Thanks, Bob.

expected and Michelle piece. the for were so asking. Let can first, the Dockers questions, thanks me take take Both

in exceed end did at profitability the as quarter, Just low we but said, expectations. of going our looking and did our terms we of on back the revenue, guidance in come we

X/X What the largely the was versus Basically, difference peso factors. low top dollar. difference or foreign of driven the exchange, Mexico by drove the end. miss end I'd between the in coming X at say vis-a-vis the coming

wholesale, which breach, script, small a The part underperforming. the -- to Mexico, you what China, customer, X/X by lower back which shipping working normal piece standards. macro in And by we was piece the can the know, with I driven largest very Part cybersecurity business are other and performance the referred is of the was and from remaining so impacted. get the driven but closely particularly Michelle we is headwind. all a is which Dockers combination China, of it as to our Mexico was

the drove So miss. those are the factors that

To your accelerate. will feel continue question about we to why

X has from both So in and quarter revenue HX, profitability. accelerated

continues quarter -- confidence mid-single the in We digit think about acceleration. at line top about give about teens. continue We the drive and factors to low -- quarter believe X But us the EBIT the grows that margin X.

are which First, than a is quarter stronger the sign. we X, good exited beginning much for we quarter

was about the stronger continued in X, Second, Europe. U.S. we -- the confident closed news. Europe and than we're quarter slightly good which the strength expected,

improve. is X, second still continue The momentum better quarter global we first only will in in a wholesale, into which more also has profitable do down business, quarter the lot is to believe direct-to-consumer was continues It our improved. than but our but not stronger, which sequentially X. half, And the sequentially

new by We product are consumer. the seeing assortments are the being also accepted

season think, we add the ready And we're for net week to and the our the is chasing there to X.X of points. X expected fact, Beyonce, get some which, then I holiday will with products of Denizen, In XXrd the momentum. partnership into as percentage is fuel

U.S. wholesale you the important the revenue expected Levi's through XX%, think in to we yes. our much the end than is terms growth profitably is are we of fact business exiting a think year And year the of than in position less is all and the we how both belief to year. Structurally, exiting for stronger are began the I year.

structurally to to stronger hope answers 'XX line total strength And enter in and and a than now that, much that Let XX% I line, combined of in I the allows is position. me bottom from XXXX. with question. the our down XX% business, us your Michelle defer less the DTC, on on Dockers. top think, I'll that, of repeat both

Michelle Gass

for Great. Yes. Bob, thanks question. the

strategic our this doctors, And decision our going terms and on amplify explore is accelerate really Levi's options intention about Yoga. to forward In the for focus. our brand of focus Beyond to is all

Dockers, underperformed for business of terms time. this has In some

as going business. so announced, this sell intention And we look an to to we're with alternatives at

you've have exited year, the footwear us a action our strategy. and we've throughout their We European distribution brand, seen of take decisive -- We fronts. on the Denizen business, number evolved exited logistics

given frankly, made So the this for Yoga. XX%. as even down well structure. believe the a we be Beyond good the overall next quarter, It And really is up terms good as will top our in the to say, biggest decision accelerate to standpoint and Dockers was term. long also the brand Levi's of we've be this going position X%, the I from would business We margin for margin as line it's that

We minimize it's also of believe kind going going consistent growth volatility. and forward, more create to

question to engaged your forward updates Bank timing, And as We've America. them. on more to started process. the just you of getting have We have can look we

Operator

Our question Boss Matthew comes of next JPMorgan. from

Matthew Boss

by points gross how So growth brand? that And to XX an the multiyear, XX X% Michelle, category on compares the share denim to global region? annual change of trends as any you're Levi's Harmit, and you basis expansion overall could algorithm? for Maybe then margin market elaborate the that to the seeing

Michelle Gass

in means I'll consumer off what X% it and kick and the Matt. of of the in context Thanks, terms category. that the growth

quarters the X% of think, growth clearly, here stores it direct-to-consumer, growth. by XX we're which terms was driven direct-to-consumer, globally, in -- XX% of now, consecutive we're to strength up for the I that's that being Levi's, relates seeing in in of as our So U.S. that And XX%, seeing the

XXX for almost track, stores And our year. accelerating on is e-commerce are the up new also openings business then store New net XX%.

So fueling that's the growth. really

that now, we In still improve. which Harmit globally, lot and expect that quarter. while that into our an important continues levers we business be collectively growth. negative, terms to headwind a to still down was to spoke are sequentially seeing we've the are to of And just part sequentially and the a fourth Levi's of going it brand that got improve wholesale, business, drive of the X%

business, look also you continue inside when acceleration the pleased with the to think women's of business. our I makeup we kind be of the really of

frankly, business, wholesale, both and seeing outperformed Levi's in for men's and overall We're women's. seeing expect to bottoms and growth Our we was in growth DTC positive. We're also continue. women's in for the business that --

strength I bottoms in mean, in DTC. tops quarter in and even for strength higher So was across channels, up up business. the X% also tops both the

So over time, addressable become pivot proof when those we we're also, talk expands which to about really company, lifestyle a market. apparel seeing points. our head-to-toe the

fourth So those around off said, are the just continue highlights and business. September. to Harmit and quarter, of the we the this as strength brand the in quarter And the and echo, Levi's I'll expect has started strong in

hence, consumer environment. long is. standpoint, on that, we from to the ahead continue get as it I'd we guide a in uncertain we also about we're optimistic We're good to feeling want about but So operate generally, but term. it good don't consumer, we category of that ourselves recognize feel we the say an

in momentum the growth resilient. the about. And the quarter another consumer proving that in as to was a U.S. about that positive numbers, I growth. Europe X%. be the our of up see of in asked was inflected whole to And terms as just up Asia course, you continues geographies, DTC You talking up XX%, of is X%. And U.S.,

the overall women's continues hasn't a As just market sharing solidly it market we're gain position, is numbers been been and historically. say focus case to the and I'd share share, which has again, to in Women's pleased. now relates the #X

I solidly #X And said, which competitor. the like share. next Xx continued over being shared, last and year, men's now the in gain complements versus We've are position, share market are that closest leader, we've market #X to we very we the

how good feel and the we very in we're driving business share. about So happening what's

Harmit Singh

to profit We've dollars to that On the increases now I through say the of let revenue incremental dollar about. reinforcing this does heard faster what that really me one are seen margin is we your of We've couple will question, to laser you've SG&A. help that it back that than quarters. the focus me we is just the board. think that And XX% metric our a Matt, operating add every really the for going And gross on got for talking business. something across second flow growth growing us algorithm, start by get the progress

Your question gross about specific margin.

what year. basis a that XX which every margin have to XX think gross of we structurally, add I said, we'll is points

think really I the that higher direct-to-consumer and better. things. we little that drive is as focused of Where could we accelerate change. say that's for doesn't business, that a And a to I a course. par try be on would couple

The in we full into product, That's especially product direct-to-consumer driven pipeline. higher chasing and innovation are be by is that's sales, our other thing business. We're to on really happening we And on the believe our that's driving continues. that going hitting price focused home.

So that big difference. makes a

we couple come. goods we and benefit And now more take time. basis in product, then really that sales 'XX this and in go-to-market XX the have say looking as agile quarters. some acceleration about source we tuned should get then simplify in over XX our to cost to But as Stay next how points for guide you and talk we're how of more calendar, at further actually the do we I'd right beyond. more We'll of

Operator

of line Our next the Cowen. Oliver of from question TD Chen comes

Oliver Chen

obviously algorithm and there think men's are be also longer-term about like growth men's? sounds the an as DTC happening your opportunity then revenue more is DTC. were to in wholesale plus It what Harmit, not And What's women's X% as and could X%, to impressive. getting building growing fast blocks you of sustainably? innovation Michelle as and there with

is enhance to on ways inventory East turns The time, of direct-to-consumer over accounting other and the like your perhaps as opportunity/question cost well. on is using Coast faster method port minds people's that on

Michelle Gass

Yes. question. Great. Oliver, thanks the for

business critical and about a over I I about time least underdeveloped today. a is of talk mean, your right? yes, win men's in our women's should focus. business business, half, Clearly, to continued while we're at we've have business. is point, lot or we be that to women's so accelerating. about with part that is But of important, very DTC So that mean, are happy strategy XX% And our our we and

must a but of have we position top retain with lot our to grow there. and we men, upside, continue So

on was add bit business, satisfied accelerate DTC. in just do did opportunity. there. more want up to from We first the we digits men's more a the the for half. But Men's Levi's color growth. high We're little single up So to accelerate not men's see X%, for quarter, positive

more on core do of And for can business, fits on call evolution And focused so there. we perform, continues XXX to the importantly, men. it, we energizing what the, are both our of

be moves taking quarter and Baggy a given the fourth are fits to we And and loose men. and did the QX. better merchandising going those team that for is now our in really hold, position versus been chasing we've in-stock planning in

for bagging fourth the I got loose, opportunity men on for think say, there covered were in the but third quarter. that missed some the quarter, we've and

speak. Chino the XX is pant, of what also like to nondenim We bottoms XX% this cool, the back head-to-toe you're business. traction and innovation for goes the very the but perform. in trend, continues of lifestyle on nondenim. kind performance-oriented it denim still warm, yes, loose denim, you now again, as about introduced the we in both about but men, bottoms, aware, stretchy of for XXX earlier then products up make share And which Levi's. time fabrics, And introducing just to We're more us comfortable, terms we're about seeing a our talking performance, which over think when it's tech a as of in then And on

we future but overall also improvement that there. as first strategy, come. But wholesale business ensuring our it also X% traction particularly I to men's were And a for growth It's The us, in we're DTC direct-to-consumer, mean, the top, wholesale be of men's a And and is channel. And our that's and it going for both for women's to focus penetrates combined opportunity seeing greater tops sequential healthy. are like we is point, our also an then there. lot to men, continues up as wholesale. this to that DTC. even in channel for seeing your all women, is continues remains relates for for globally, for you where know, opportunity total And channels. the

both that we QX, again, and head men's about would women's into for talked business. So acceleration the overall, carry as we we're expecting and

Harmit Singh

Oliver, both. To on answer X%. your inventory, speed I'll other about X questions, a turns do Inventory

goal a We're is or Dockers exit SKUs are we're on we calendar, go-to-market inventory areas it committed that long-term and working of to lower. we're capital our should substantial faster the is X%. Our reducing working amount and lock a help because actually on, Dockers cash. tailwinds and working turn The

to think And the issues the all we to, which port the chain referred that talk think supply just thing about one one that the and is little need, bit I we I everybody some more had. consistency I'll you we've needs, need latest of in a retailers is have -- that issue.

now. clarity, our a of more a chasing make us new But difference I getting think stock all more will have case, bit the in just are And consistency, big little right really stuff. because safety we

new will those the probably we're on. stuff lose just things don't make I more buy So sales. to think the we sure But are of we working that

On port the it's a developing situation. strike,

We couple prepare months. for We've as been ourselves the to everything of can. much we on this are we last can working doing as

the how we've But the Knowing early and that like else, proactively been on Coast. example, as We, March, goes the impact as working for routes long monitoring to horizon, was on through it on for. West shifted this closely. it on will the us proactively been everyone situation on we've depend

have the et holiday product POs season, to We have that prioritized et and cetera, the certain for cetera. airfreight ensure to switch just we

else quickly. hope gets like our everyone so that is And resolved this

Operator

of Ike comes Our next line Boruchow question of Wells the Fargo. from

Irwin Boruchow

Michelle, of a that the a of you was you are the for be Maybe execution expectation U.S. you're the channel, on that so own get your what little on to would great. kind on just about bit in state maybe your Harmit quarter? or how is with weakness fourth elaborate far based just thinking that seeing just the can more your trying union wholesale, What expectation? line And it, macro then the and quarter? in Was

Michelle Gass

for true our meeting expectations. U.S. We've line very would brand the Sure, I'm in with that. for came talked expectations, wholesale wholesale Levi's I that say the channel. happy much our about Dockers to take and was not that in largely

and As X%. but U.S., I only also was X%, the spoke not was wholesale, down the earlier, And down kind wholesale bright will global in of that in the for I U.S. sequentially up spot, to frankly, a add also from total women's half. the company, then global wholesale first improved business.

this trend The and up women's And fits, that's baggy X% and X% also driving been in by was up fashion including head-to-toe globally the driven denim dressing, tops. and U.S. wholesale. the

this down would are down be with while said, our like again, wholesale getting headwind traction X%, continues add we tops that sales, to sequential in are a DTC XX%, X%, I We I to U.S. business. improvement. seeing, wholesale up a wholesale

improvement We expect carry beyond. that to into and QX sequential

focus sales part that, impacted focused of add off-price We has the accounted And price example, in leverage candidly, as as top U.S. an on channel also of full line margin bit, points less basis the frankly, saw price I'd that the profitability improving. was on selling quarter. also full been, all a selling. gross more of XXX wholesale, little this but we is for having in that

channel. So important say, I'll just

us Our that going us really adoption big forward sure is for to important products and key customers are of really we important the new them. And we're unlock great the we're to get I think offering. making

a fashion broader, that flow bigger through. in we see like DTC, Sometimes, of and have fits assortment we

how customers tops, that. head can we adopting to really and and some toe beginning our get of to more adopt we wholesale lifestyle, are So see whole to including the those quickly. are key

and momentum things fourth carry these the think into I quarter our So beyond. and to build

Operator

Roach of comes Sachs. the Our Goldman next from Brooke question of line

Brooke Roach

margin? hoping drivers gross about of puts the gross disruption? takes is then you that we supply currently prior recapture outlook, could the pricing And quantify was for ahead, offsets still chain How thinking and you're your points from you promotions? thinking on in I and the which on your cost looking about outperformance the What are and be And XXX quarter should was outlook in are horizon? I freight what basis of embedding believe margin versus expansion. Harmit, the of how level

Harmit Singh

Brooke. Sure,

So buckets this. terms of the in what big drove

and higher effort the especially, as was So price we higher sales. basis extra year gross But earlier, full of And we're by relative points are the from basis product. ago, helped. clearly now you mentioned points a if we're that it. brand we I basis bringing And cost airfreight would were that XX home up into expected, we XXX, break XXX-odd into chasing to channel offsets than points basis had product think to hitting and products points. put XXX-plus basis I a are I is largely chasing then market FX XXX and few And from margin XX because say We this airfreight. mix. points

on job price a quarter, doing our a the full is strong folks is improving to are teams to strong that really is and year It's -- what is mix, and DTC from DTC one which ground coming sales. difficult we a extra an point the always higher which from X.X is Europe about ago walk, predict relative thought great e-commerce channel from point So that. had

have opportunity. -- We we are still

to more difficult predict. there's sometimes a to due lower so point And COGS, come and to

for drove So that's margins are we quarter. That's gross how gross of the thinking margin. really what

X, we the a and higher sales. XXX, a cost of year, a factors. probably FX XXX basis driven points product about For headwind, And quarter by tailwind, mix same a points ago. same. -- basis end to tailwind -- year price think no, that's year really full better than the that's the actually why as XXX-plus I the close much we'll And XXX think

Operator

of UBS. The next comes question Jay Sole the of from line

Jay Sole

DTC Great. everything was People to try a much that in have a to company say in to doing skills does is and step would to what company add? Where is take I the versus journey? How the how like you mean, more the journey? Michelle, does talent acquire? company have is that the global into the business that you along can company far about business. just back for you a a second, traditionally think transform wholesale company maybe

Michelle Gass

into the I an stages. where initiative making this It's called I bottom -- top we for we it's about accelerate billion $XX just more And that not ambitions Project profitably how we're early more about think this have Jay, still I'd great the -- I'd profitable first a growth our say have Fuel, in we're question. Thanks, said, a It's Yes. and company. say reach global about the would initiative. But rapid that question. we company line. particular, of also the mean our all, line. year, in turning which I is to say, But productivity do progress.

but Jason who leaders play candidly, skills. I our Nordstrom, our We which expertise and And deep deep, process in of in is work do digital are came are we down And has -- XX business seeing comes overall. over joined with of And new DTC have a you're who just some speed us, much a of our get to of rewiring out mean, the e-com years our lanes alluded XX-month months calendar. take in brought these cases, be see to he it, to lot of company, several out faster. Harmit who very the Gowans the to Gianluca e-commerce. a will how in now call number we we from retail out experience. it, going that of, Flore acceleration go-to-market,

So one example. that is

is increase. overall through no to that the drive seeing accelerate piece actions out. it's we've we're And and pay accident seeing to and DTC this I we're profitability Fuel other would taken The productivity, point that Project

a where driving skills, addressing XXX-plus have pilot We selling stores we're in UPT.

actually being is showing in an coupled profitability which as transaction, more back better with labor the retail, per driving through things we're of deployment. the boxes, and of expert are units out growth, All conversion seeing earlier, that I our on metrics, like of like and remarked all positive

be So to journey. would multiyear But talk there's this a will here. a lot about say I

progress. put accelerated say has I'd progress the but to months. percent, So that a it's we're think I XX making hard in great And last

Operator

Our of BNP from comes Paribas. next of line question Vasilescu Laurent the

Laurent Vasilescu

if year -- but talk not that, up for there if spring talked from I know fell continue Harmit, the some the quantify you're about was seeing I for can And you you 'XX, if a If to And next think XQ the line think, you European X%, in think was case, XQ? I maybe for you're mentioned recognize about going XQ that's Michelle, you top can potentially are I indications about about I timing quarter? -- Mexico. shifts, revenue potentially there's wholesale that recall. as don't it then how into of much talk would what into year? fiscal whether fourth we

Michelle Gass

Yes.

So great. Thanks for the question.

in in around of In innovation the X%. to more skirts, customers, this terms denim strength we're been That's adopt Overall wholesale, more tops, growth been wholesale in yes, you have pleased dresses seeing. out, to XX% Across women's. we both Europe to more lot lifestyle, new genders Europe, we're to in Europe acceleration see quick of X% key growth, head flat toe DTC. A were as both working. our pointed very channels. and a with product especially lot in And they're seeing

as how for plays look that grow. stay of baked is know as the think surely, beyond, anticipating to total year that market, to positive we're we So is we next a into And continues our really Europe. guidance. out, we tuned. Europe to Everything a start Exactly and trend continue this a

great leadership team a have there. We

one that to was of prebook, asked Our be you That QX. contributed prebook does continue since about to factors wholesale, our positive. the

all market. positioned feel very all, in So well in that we're like we

Harmit Singh

ship. the with that underperformed We -- your the is we're The cybersecurity feel because time brand of into want and And it, the customer. the a quantify largest the generally, have take working it's Yes. I to Mexico to reason little a through And while about business one the little our healthy timing. through matter implications, we're quantify it these of fact I it they it. a things, business, question, and won't bit technology and where the constrained -- working is the good because that Laurent, reason reasons of is because are was

to you I need sides. on clear working need just come. -- to to a for the not more we giving improve both I'm But start another reason just the systems this So quarter answer is because and

Michelle Gass

that, We'll And And for questions. see you happy everyone, the holidays. thanks, call. call and next with the your at joining

Operator

you. time. Thank This concludes lines call. conference disconnect today's at your this Please

Levi Strauss & Co. (LEVI) 2 Oct 242024 Q3 Earnings call transcript